Artificial barriers to entry have been a feature of markets for millennia, from medieval guilds to modern occupational licenses. Though often defended on the basis of consumer protection, barriers which keep new providers of a good or service out of the market also serve to protect incumbent businesses, hamstring innovation, and increase prices. Such barriers are often an underappreciated factor behind rising costs—particularly in higher education.

Despite a recent drop, demand for higher education has increased in the long run. The number of students on America’s college campuses has grown by six million (29 percent) since 1990. But the number of colleges hasn’t increased at a commensurate rate. In fact, there are fewer active colleges today than there were in 1990.

This suggests the presence of barriers to entry in the market for college. Indeed, entrenched institutions dominate the higher education landscape. 92 percent of four-year college students attend a school that was founded before 1980. In addition, many of the “new” schools that enroll the remaining eight percent are actually new branches of existing institutions. True startup colleges are vanishingly rare.

In the United States, the first point of entry to the market for a new college is the state government: specifically, a state-designated authorization agency. Through these agencies, states have considerable power over how open or closed their higher education markets are. Yet most states, whether deliberately or inadvertently, have created steep barriers to entry for new colleges.

In a new report for the Foundation for Research on Equal Opportunity, I examine the landscape of state authorization for higher education and suggest several reforms states could pursue to make higher education markets more open and dynamic, while still ensuring students are protected from fraudsters and bad actors.

Reduce inputs-based requirements for new colleges. States often require new colleges to hew closely to the way existing colleges have traditionally operated. Many states have implicit or explicit requirements regarding faculty, administration, and facilities. This compliance-based regulatory approach often necessitates long timelines for initial approval and can sideline potentially innovative departures from traditional models of higher education. Where possible, states should remove requirements around “inputs” into the education process and focus instead on consumer protections and student outcomes.

Focus on consumer protections. Rather than a checklist of inputs, state authorizers should look to ensure that new colleges adopt key consumer protections to make certain that students are insulated from harm should the new school fail. These protections should include strong tuition refund policies, a demonstration of financial capacity to operate, and a teach-out plan to make sure students can finish their degrees if the institution closes. Authorizers should recognize that innovation requires experimentation with new ideas, which sometimes won’t work out. Rather than blocking experimentation, authorizers should instead ensure that students are protected when new ideas fail.

Leverage student outcomes data. States must reauthorize colleges periodically after those schools’ initial approval to operate. These reauthorization decisions should incorporate data on the school’s student outcomes, including graduation rates, loan repayment rates, and students’ earnings after leaving school. While states should pursue low barriers to entry in higher education, low barriers should not mean low standards for student outcomes at colleges with a performance record to evaluate.

Decouple accreditation from state authorization. Most states require new colleges to become accredited at some point in the authorization process. Yet accreditation imposes significant upfront costs on schools, while its value as a quality-assurance mechanism is questionable. States should allow new colleges with no interest in seeking taxpayer funding to bypass accreditation; a school shouldn’t need accreditation simply to exist. Decoupling accreditation and authorization would give new schools more runway to prove the value of innovative models without worrying about satisfying an accreditor’s every whim.

Make authorization a priority. State authorizers often outsource quality assurance in higher education to accreditors because many states make authorization an afterthought. State agencies designated as authorizers often have myriad other duties in addition to authorization; some agencies have the equivalent of less than one full-time employee devoted to authorization. This lack of staff capacity can vastly extend timelines for state approval. While states should be cautious about expanding bureaucracy, they should ensure that staff tasked with implementing reforms to the authorization process have sufficient resources to do their jobs.

Declining faith in higher education means colleges must change something about the way they operate. Often, innovation comes from the outside: New entrants with new ideas about how to do things can shake up tired old models and practices. States should strive to create an open market for higher education, giving innovative ideas the opportunity to prove their worth.